Bonds 101: General Obligation Bond Basics

Transcription

1 May 17, 2018 Bonds 101: General Obligation Bond Basics Lauren MacMillan SENIOR VICE PRESIDENT PIPER JAFFRAY Tel:

2 BONDS IN GENERAL Textbook definition: Written evidence of debt o Fancy term for a loan o Can be broken into pieces and sold to multiple investors or sold directly to a bank School districts issue bonds to finance major capital projects they cannot afford on a pay-asyou-go basis Interest on municipal bonds is generally exempt from both federal and state income taxes o o Helps lower interest rate Strings attached 2

3 GENERAL OBLIGATION (GO) BOND BASICS Issued by municipalities Debt service (principal and interest) is secured by a property tax levied on all properties within the Issuer s boundaries and the Issuer s full faith and credit The property tax levy is unlimited and dedicated to payment of debt service o Levy rate can be set as high as necessary to generate enough revenue to pay debt service o Tax collections must be used for GO bond debt service GO bonds are considered to be the highest quality credit a school district can offer Must be approved by voters 3

4 GO BONDS IN OREGON GO tax levy is not limited by Measure 5 or Measure 50 and is in addition to permanent rate 4 elections: March, May, September & November o Only November and May not subject to double majority State law allows school districts to issue up to 7.95% of Real Market Value o For Hillsboro SD, that s $1.76 billion! Ballot title approves an amount, use of proceeds and maximum years to maturity o Estimate of projected levy rate can be included but cannot guarantee rate and voters do not approve the rate 4

5 BALLOT TITLE Estimate of levy rate impact NOT a rate limit or guarantee 5

6 KEY PROPERTY TAX CONCEPTS Since GO Bonds are repaid with property taxes, it is important to understand a few key concepts: Real Market Value (RMV) o Amount that a property could reasonably expect to sell for as of January 1 Assessed Value (AV) o o Value of property subject to taxation Cannot exceed the RMV Bond Levy Rate o o Tax rate expressed in dollars per $1,000 of AV Calculated annually and set by county assessor Issuers do not set the rate and cannot guarantee a levy rate 6

7 PROPERTY VALUE GROWTH Look to historical AV growth to inform future growth assumptions AV growth for existing properties limited to 3% o District-wide values grow in excess of 3% due to new construction Fiscal Year M5 Real Market Value Total Assessed Value Urban Renewal Excess Net Assessed Value % RMV Growth % Total AV Growth 2018 $ 22,224,039,788 $ 15,508,996,100 $ 196,816,038 $ 15,312,180, % 5.2% ,976,367,255 14,737,099, ,316,990 14,586,782, % 4.4% ,084,023,581 14,109,367,269 90,358,842 14,019,008, % 12.0% ,044,946,890 12,599,017,136 71,068,865 12,527,948, % 5.1% ,411,174,670 11,984,033,679 37,161,339 11,946,872, % 4.6% ,539,051,755 11,458,438,728 19,960,976 11,438,477, % 0.7% ,163,468,669 11,373,273,755 16,465,502 11,356,808, % 4.2% ,546,832,813 10,914,091,631 5,538,530 10,908,553, % 4.3% ,094,001,521 10,467,292,887 4,560,465 10,462,732, % 3.6% ,972,729,386 10,104,051,421 3,629,020 10,100,422, % 5.3% ,389,901,187 9,591,209,988 2,445,991 9,588,763, % 4.7% ,883,714,994 9,157,445,135-9,157,445, % 3.6% 7

8 PROJECTED LEVY RATES AV Growth % % % Thereafter 3.50% 8

9 CALCULATING THE LEVY RATE Debt service is payable from a dedicated property tax levy in addition to operating levy District staff submits to assessor the amount it wants to levy Levy rate is calculated annually by the County Assessor: Debt Service Due + Delinquencies Funds on Hand = Levy Rate (Assessed Value/1,000) Actual rates set depend on AV in future 9

10 2017 SALE HIGHLIGHTS First piece of 2017 authorization sold 12/12/17 Despite market turmoil due to tax reform and elevated supply at the time of sale, the District achieved strong results o Orders for offering amount filled within 10 minutes o At end of order period, over $2 billion of orders were submitted o Overall cost of financing (including issuance costs) was 3.24% 10

11 BOND PREMIUM Investor demand for premium bonds due to low interest rates & expectation rates will rise Investors willing to pay more than 100 cents on the dollar in order to generate a higher income stream from interest payments Premium structure ultimately helps the District obtain the lowest yield and satisfy investor preference Generated $51.6 million of premium that can be used on projects approved in ballot title o Total purchase price of 119.2% o Total proceeds of sale were $320 million 11

12 BOND PREMIUM 12

13 PROJECT FUNDS Federal tax law requires issuers to have a reasonable expectation they will spend 85% of bond proceeds within 3 years of issue date o Also have to spend the OSCIM grant within 3 years of when State sells their bonds Split the authorization into two sales to comfortably meet spenddown requirements Remaining authorization scheduled to be sold in summer of Par $ 268,395, Premium 51,600,506 OSCIM Grant 6,000,000 Remaining Authorization 139,605,000 Available for Projects $ 465,600,506 13

14 DISCLOSURE Piper Jaffray is providing the information contained herein for discussion purposes only in anticipation of being engaged to serve as underwriter or placement agent on a future transaction and not as a financial advisor or municipal advisor. In providing the information contained herein, Piper Jaffray is not recommending an action to you and the information provided herein is not intended to be and should not be construed as a recommendation or advice within the meaning of Section 15B of the Securities Exchange Act of Piper Jaffray is not acting as an advisor to you and does not owe a fiduciary duty pursuant to Section 15B of the Exchange Act or under any state law to you with respect to the information and material contained in this communication. As an underwriter or placement agent, Piper Jaffray s primary role is to purchase or arrange for the placement of securities with a view to distribution in an arm s-length commercial transaction, is acting for its own interests and has financial and other interests that differ from your interests. You should discuss any information and material contained in this communication with any and all internal or external advisors and experts that you deem appropriate before acting on this information or material. The information contained herein may include hypothetical interest rates or interest rate savings for a potential refunding. Interest rates used herein take into consideration conditions in today s market and other factual information such as credit rating, geographic location and market sector. Interest rates described herein should not be viewed as rates that Piper Jaffray expects to achieve for you should we be selected to act as your underwriter or placement agent. Information about interest rates and terms for SLGs is based on current publically available information and treasury or agency rates for openmarket escrows are based on current market interest rates for these types of credits and should not be seen as costs or rates that Piper Jaffrey could achieve for you should we be selected to act as your underwriter or placement agent. More particularized information and analysis may be provided after you have engaged Piper Jaffray as an underwriter or placement agent or under certain other exceptions as describe in the Section 15B of the Exchange Act. Piper Jaffray Companies (NYSE: PJC) is a leading, international investment bank and asset management firm. Securities brokerage and investment banking services are offered in the U.S. through Piper Jaffray & Co., member SIPC and FINRA; in Europe through Piper Jaffray Ltd., authorized and regulated by the U.K. Financial Conduct Authority and Simmons & Company International Limited, authorized and regulated by the U.K. Financial Conduct Authority and the Dubai Financial Services Authority; in Hong Kong through Piper Jaffray Hong Kong Limited, authorized and regulated by the Securities and Futures Commission. Asset management products and services are offered through four separate investment advisory affiliates U.S. Securities and Exchange Commission (SEC) registered Advisory Research, Inc., Piper Jaffray Investment Management LLC and PJC Capital Partners LLC; and Guernsey-based Parallel General Partners Limited, authorized and regulated by the Guernsey Financial Services Commission. Since Member SIPC and NYSE 2016 Piper Jaffray & Co. piperjaffray.com PIPER JAFFRAY 14

15 All Feeders Program Budget for Bond /11/2018 Hillsboro School District TOTAL HSD Grouped Fund xxx. DRAFT No. School Scope Year Feeder Accnt Code Jurisdiction Contractor PM Architect Original Project Budget 14 Glencoe New Turf/Lights 2018 GHS City Bernhardt Golf CM AKS $ 2,333, $ 3,033, HilHi New Turf/Lights and Track 2018 HHS City Bernhardt Golf CM AKS $ 4,156, $ 4,331, Brown Boiler Replacement 2018 CHW City Ameresco JP $ 587, $ 587, Butternut Creek Playgrounds 2018 CHS County Cas Rec/NW Play/5 Star LH 3J $ 189, $ 339, Butternut Creek FFE 2018 CHS County McD / SS KR N/A $ 205, $ 205, Eastwood Parent/Bus Drop off Improvements 2018 LHS City TJ 3J $ 744, $ 744, Farmington View Playgrounds 2018 HHS County Cas Rec/NW Play/5 Star LH 3J $ 189, $ 364, Farmington View FFE 2018 HHS County McD / SS KR N/A $ 157, $ 157, Farmington View Replace 1 Double Portable 2018 HHS County MBS / TBD RC 3J $ 295, $ 295, Free Orchards FFE 2018 GHS Cornelius McD / SS KR N/A $ 198, $ 198, Groner FFE 2018 HHS County McD / SS KR N/A $ 112, $ 112, Jackson Parent/Bus Drop off Improvements 2018 GHS City TJ 3J $ 826, $ 826, Jackson FFE 2018 GHS City McD / SS KR N/A $ 283, $ 283, Ladd Acres Parent/Bus Drop off Improvements 2018 CHS City LH 3J $ 1,103, $ 1,103, Ladd Acres Water Pipe Replacement 2018 CHS City Ameresco JP $ 165, $ 520, Lincoln Street FFE 2018 GHS City McD / SS KR N/A $ 263, $ 263, Mooberry FFE 2018 LHS City McD / SS KR N/A $ 232, $ 232, North Plains FFE 2018 GHS North Plains McD / SS KR N/A $ 166, $ 166, North Plains Relocate Portable from Reedville 2018 GHS North Plains MBS / TBD MD $ $ 170, Reedville Safety & Security 2018 CHS County $ 305, $ 205, Reedville Improvements 2018 CHS County In Line JA Mahlum $ 7,420, $ 9,370, Reedville FFE 2018 CHS County McD / SS KR N/A $ 122, $ 122, Tobias Roofing 2018 CHS County Anderson RC WTI $ 1,503, $ 1,503, Tobias FFE 2018 CHS County McD / SS KR N/A $ 221, $ 221, W.L. Henry Playgrounds 2018 HHS City Cas Rec/NW Play/Rychart LH 3J $ 189, $ 329, W.L. Henry Replace 2 Double Portables 2018 HHS City MBS / TBD RC 3J $ 590, $ 590, W.V. McKinney Parent/Bus Drop off Improvements 2018 GHS City TJ 3J $ 744, $ 744, W.V. McKinney Replace 2 Double Portables 2018 GHS City MBS / TBD LH 3J $ 590, $ 590, West Union Playgrounds 2018 LHS County Cas Rec/NW Play/5 Star LH 3J $ 189, $ 354, Witch Hazel FFE 2018 HHS City McD / SS KR N/A $ 275, $ 275, Miller Ed W Water Pipe Replacement City Ameresco JP Ameresco $ 181, $ 431, Transportation Cameras on Buses City 24/7, Ubicabus N/A N/A $ 744, $ 744, $25,288, $29,418, Current Budget

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20 Seismic Upgrades & Timelines Building Budget Start Complete Butternut Creek Elementary $477,509 June, 2021 August, 2021 Eastwood Elementary $1,773,834 June, 2019 August, 2019 Farmington View Elementary $903,879 June, 2021 August, 2021 Groner K-8 $2,191,401 June, 2021 August, 2021 Indian Hills Elementary $592,216 June, 2020 August, 2020 Jackson Elementary $1,238,588 June, 2021 August, 2021 Ladd Acres Elementary $503,592 June, 2020 August, 2020 Lenox Elementary $715,050 June, 2019 August, 2019 McKinney Elementary $1,689,555 June, 2020 August, 2020 Minter Bridge Elementary $2,280,979 June, 2020 August, 2020 Mooberry Elementary $1,332,341 June, 2020 August, 2020 North Plains Elementary $2,704,402 June, 2021 August, 2021 Reedville Elementary $1,160,508 June, 2018 August, 2018 West Union Elementary $1,360,381 June, 2019 August, 2019 WL Henry Elementary $609,594 June, 2020 August, 2020 Poynter Middle School $11,311,973 June, 2019 August, 2019 Brown Middle School $2,520,000 June, 2019 August, 2019 Evergreen Middle School $1,621,827 June, 2019 July, 2020 Glencoe High School $2,049,450 June, 2019 July, 2020 Hillsboro High School $3,272,743 June, 2019 July, 2020 Miller Big-Picture (David Hill) $3,838,888 June, 2019 August, 2019 Miller East Campus $328,557 June, 2021 August, 2021 Peter Boscow $687,534 June, 2021 August, 2021

21 DAS Upgrades - Budgets and Timelines.xlsx Building School Built Building Sq. Ft. Date of Test Results Upgrade Required Butternut Creek Elementary School ,840 Eastwood Elementary School ,163 Farmington View Elementary School ,867 Free Orchards Elementary School ,500 5/14/18 Yes Groner K ,402 Imlay Elementary School ,435 5/14/18 Yes Indian Hills Elementary School ,219 Jackson Elementary School ,767 5/14/18 Yes Ladd Acres Elementary School ,825 Lenox Elementary School ,074 Lincoln Street Elementary School ,513 5/14/18 Yes McKinney Elementary School ,163 Minter Bridge Elementary School ,163 Mooberry Elementary School ,493 North Plains Elementary School ,613 Orenco Elementary School ,435 5/14/18 Yes Patterson Elementary School ,435 5/14/18 Yes Quatama Elementary School ,000 5/14/18 Yes Reedville Elementary School ,247 Rosedale Elementary School ,700 5/14/18 Yes Tobias Elementary School ,000 5/14/18 No West Union Elementary School ,757 Witch Hazel Elementary School ,435 1/25/18 Yes WL Henry Elementary School ,813 South Meadows Middle School ,875 1/25/18 Yes Poynter Middle School ,200 5/14/18 Yes Brown Middle School ,414 5/14/18 No Evergreen Middle School ,000 5/14/18 Yes Century High School ,000 1/25/18 Yes Glencoe High School ,000 1/25/18 Yes Hillsboro High School ,652 5/14/18 No Liberty High School ,900 1/25/18 Yes Miller-Big Picture ,000 Miller Ed-East Campus ,599 Peter Boscow ,888 Admin Center ,000 Facilities ,000 Transportation 1997?? Work Start Work Complete